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Thread: How can they do that?
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05-22-2003, 12:19 AM #1Newbie
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How can they do that?
I have been doing some research, and I am about to start a hosting company via a reseller account. I visited some random hosting companies found through google and what not. I do not understand how they can offer such low prices. I am seeing like 12 GB of bandwith a month for like $7.95 or 5 GB for $3.95 or other crazy (seems crazy to me at least) priced stuff.
The prices I plotted were much higher then that. Not that they were much higher dollar wise, just much less bandwith.
Now my questions is this. Did I really screw up my research? Am I an idiot and should just forget about doing this? I just dont see how those prices are possible. How do they do that? Is it because they are on dedicated servers instead of reseller accounts or what? Thanks for any and all answers.
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05-22-2003, 12:23 AM #2Junior Guru Wannabe
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A lot of hosts are indeed on dedicated servers, allowing them to sell at better prices. Others at those prices are just con artists advertising good prices so they can scam people...
I think on a dedicated server it would actually be possible to sell 10 GB bandwidth for $5 and still make quite a hefty profit... don't worry about it if you're getting a reseller account, though.
For an example of this, take a look here and you'll see what I mean...
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05-22-2003, 12:28 AM #3Web Hosting Master
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Many many many threads have been addressed on this issue. It pops up in a bunch of different ways.
i. People ask questions like you did
ii. People discuss overselling
iii. People talk about price vs value.
Basically its called overselling. Overselling is when you put more people on a server than the server is able to handle assuming that not all your clients will use the resources avaiable to them.
For a good post check out these threads:
http://www.webhostingtalk.com/showth...hreadid=145017
http://www.webhostingtalk.com/showth...hreadid=144868
and
http://www.webhostingtalk.com/showth...hreadid=133478www.idologic.com
www.demologic.com
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05-22-2003, 12:29 AM #4Web Host :)
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I think the main thing you need to realize is that almost everyone oversells.. The big difference in the companies is how much they offer.. Some may oversell by 5% and I have also seen people overselling by 900% which is most likely the ones you are seeing.
The main thing you first need to realize is that you will never be able to survive attempting to be the cheapest because the is always someone offering more for less. The best thing for you to do is build a solid business plan, figure out what you can offer to make up your rates to where you will make a decent amount of profit and just provide the most reliable support and customer service you can.
Also think of this. Would you rather have 500 clients paying $2/mo or 100 paying $10/mo?
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05-22-2003, 12:36 AM #5Web Hosting Master
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OKIHosts was bang on. His advice sound. I disagree, however that nearly everyone over sells.
There are many who don't even oversell 5% for reliablity reasons. There is simply no need to oversell.www.idologic.com
www.demologic.com
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05-22-2003, 12:37 AM #6Junior Guru Wannabe
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It's not necessarily overselling, is it? With a dedicated server which costs $98 a month for 80 GB space and 500 GB bandwidth, it's fully possible to make a very hefty profit selling 1 GB space and 6 GB bandwidth for just $5 a month...
Or maybe I'm misunderstanding something here myself...?
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05-22-2003, 12:41 AM #7Web Hosting Master
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I think you'd be hard pressed to find a server (with everything necessary to support most websites) for that cheap. (I'm not saying it doesn't exist).
If your a small company Cpanel will cost you between $40 - $60 dollars / server alone. Add in the need to duplicate drives (for back up) and service / support most servers worth their while are going to cost you more than that.
*shrugs*
Cheers
Jeffwww.idologic.com
www.demologic.com
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05-22-2003, 01:29 AM #8Web Host :)
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Originally posted by OKIHost
Some may oversell by 5% and I have also seen people overselling by 900% which is most likely the ones you are seeing.
At 1GB/6GB for $5 a month you can fit say 70 accounts after OS install, control panel install etc. So we have:
70x5=350
350-98 for server = 252 a month.. = about $8 a day pay
How much is your time worth?
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05-22-2003, 07:30 AM #9Web Hosting Master
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Don't sell yourself short because other idiots do. Sell what you think it's worth. You don't need to compete with the bottom budget people to get business.
What does one host say to the other? "(HostA) Want to go see a movie?" "(HostB) Sure, can your parents drive?"
I'm premium, and no, I did not have to pay $6 a month to figure that out.
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05-22-2003, 03:00 PM #10Junior Guru Wannabe
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OKIHost is right on doing the $$$ comparison. You can get a server with that amount of space, probably a celeron, that wil probably burn itself up if it's in a 1U unit. The problem is, when you only charge that much, you are probably someone that is working out of your basement by yourself. I don't have a problem with working out of your basement, but if you don't have a proper staff, you are going to go down in flames and get in way over your head. It all comes back to the old saying..."You get what you pay for". If you really dig back in the posts here at WHM, you can see what really happens to the hosting guys that undercharge and oversell. You can also see what happens to the companies that can't afford to hire qualified staff.
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